Management of Mark and Spencer Group - Essay Example

FINANCIAL MANAGEMENT al Affiliation) Key words: Financing, operating, and investing activities, Mark and Spencer PLC Introduction Mark and Spencer Group is a retailer found in United Kingdom. The organization is the holding firm of Mark and Spencer Group of companies. The company is a clothing retailer found in United Kingdom with over 731 branches across the nation. The company sells the womenswear, home ware, menswear, and lingerie. The company offers home and clothing products in addition foods sourced from more than 2000 suppliers from all over the world. Two years ago, the products of the company were also sold through 730 United Kingdom branches and 390 internationally. The company has 387 branches in 43 countries across Asia, Europe, and Middle East. Spencer PLC has more than 703 branches across UK in retail parks and in high streets in addition to the airports, stations and other places ranging from the flagship store and out of town over square feet of 100,000 to conventional Food Stores of 7 thousand square feet. (Media, 2011).   IFRS IFRS IFRS IFRS UK GAAP 2013 2012 2011 2010 2009 52 weeks 52 weeks 52 weeks 52 weeks 53 weeks £m £m £m £m £m Cash flows from operating activities           Generated from operating activities 1,236.00 1,443.30 1,197.50 1,601.80 666.5 Taxation paid -166.2 -150.8 -101.5 -166.7 -220.4 Cash flows from operating activities 1,069.80 1,292.50 1,096.00 1,435.10 446.1 Cash flows from investing activities           Acquisitions and disposals -46.4 48.8 – 351.1 51.3 Capital expenditure and financial investment -924.6 -712.8 -266.3 -113.5 -317.4 Interest received 4.8 13.2 12.9 15.4 14.4 Cash flows from investing activities -966.2 -650.8 -253.4 253 -251.7 Cash flows from financing activities           Interest paid1 -88.9 -145 -142.8 -116.5 -61.2 Non-equity dividend paid – – – -2.8 -3 Other debt financing 954.5 -479.2 -420 757.1 413.6 Equity dividends paid -343.6 -260.6 -204.1 -236.9 -247.1 Other equity financing -556.2 9.2 55.8 -2,265.10 -66.6 Cash flow from financing activities -34.2 -875.6 -711.1 -1,864.20 35.7 Net cash inflow/(outflow) from activities 69.4 -233.9 131.5 -176.1 230.1 Spencer PLC Operating Activities The operating activities cash flow, the net cash gotten from the operations has been inconsistent from 666.5 M in 2009, 1601.80 M in 2010, 1197.50 M in 2011, 1443.30M in 2012, and 1236Min 2013. There was little impact of the currency movements on the sale and to the operating profit (Focardi & Fabozzi, 2004). Since the increase of the amortization the income tax reduced but this did not have any impact on the operating cash flow. The reduction in the net cash that the company earns means that the firm has less money to invest. This will subsequently lead to reduction in acquiring the assets and thus fewer dividends are declared to the investors. The cash adequacy ratio shows that the firm operating activities produces insufficient funds to meet the needed business obligations. The Spencer business has since reduced over the years which are evident from the reduction trend of the operating cash flows (“Foundations of Finance The Logic and Practice of Financial Management, Student Value Edition + Myfinancelab Package”. 2010). This means that the subsidiaries are deteriorating over the years. With the above data it is clear that the net cash flow has been reducing over the last three years which is not a good sign for the company. Spencer PLC Investing Activities The net investing cash flows from the investing activities have has unfavorable data which are in negative since 2009.. As outlined in the table the figures from 2009 shows a deficit of 251.7 M, 2010 showed a surplus of 253M, a deficit of 253.4 M for 2011, a deficit of 650.8 in 2012, and a deficit of 966.2 was reported in 2013. The company acquired properties, investments, equipment and plants. The discontinued operations over the years relates to the sale of the company’s subsidiaries which led to the loss of money. Spencer has neither purchased nor disposed any of the old commodities. The main reason for this is because of the transition in recession that hit the company therefore, affecting the proper cash inflows from selling the subsidiaries (Howells, 2003). Spencer PLC Financing Activities The Spencer’s statement for the financing activities include the sales from issuing the ordinary shares which accounts for a greater number of cash flows, from the data the company got -34.2M, -875.6M, -711.1M, -1864.20M, and 35.7M in 2013 to2009 respectively. The company also sold the common and preferred stock which accounted for a greater percentage in financing activities cash flow. Some of the income was used in paying back outstanding long term debts that the company owes. The cash flow was somehow strong, but long term debts were big with the effect of disposal and acquisition and the vigor of the year end. The recession that hit the company in 2008, made the company to receive a nominal amount from issuing ‘ordinary shares since the market had little cash to invest in the firm due to which made the proceeds to decline over the subsequent years. Additionally, the company failed to purchase treasury shares in the previous years as they thought that it was a riskier affair (Chant, 1989). The company has borrowed more during the three years and has tried to repay the borrowings from the cash flow derived from other activities. Although the industry has been unstable and the investors started losing hope in the industry, the company has tried to pay many dividends to their shareholders, who shows that the move will attract more investors and maintain a longer relationship with the present investors. Another crucial into in the activity is the exchange of currency since the company took a set back as a percentage of the sales are in United Stated dollars. Due to the fluctuation of the market and the weakening of the domestic currency has resulted to a crucial amount of cash being exported in Dollars which is not a good sign for the firm. Despite the financial crisis in the industry, the company has strived to report a decent performance, which is clear from the cash reported at the end of the third year (Beckett, 2009). In Spencer PLC, the company requires that the directors focus on the value of the shareholders. Meaning that the board of the company must make sure that the business of the company is sustainable and is in apposition of taking into account the consequences in coming with the business strategies and models. When a company has good governance, the ability of the board to manage the firm effectively in delivering the long run success and providing accountability to the shareholders will be guaranteed. The effectiveness of the board during the discharge of their activities determines the financial health of the company. The directors are responsible for driving Spencer forward within the benchmark of proper accountability. This is the objective of the company. A regulatory benchmark that is intended to improve the benchmark of Spencer’ corporate governance has a higher chance if succeeding if it approves that the governance needs to support the entrepreneurial leadership of the firm, as it ensures that the risk of the firm is well managed. This needs an extent of flexibility in the way the firm adapts and adopts the practices of governance. The board of the company needs to oversee the good governance as a way if improving the performance of the company not only through compliance exercise. For the company to be efficient and effective, the standards need to be carried out in a manner that fits the organization and culture of the company (Spencer, 1992). This varies greatly from one company to the other depending on the complexity of the firm’s activities, ownership structure, and its size. In conclusion, the analysis of Spencer from the data given, it would be true to conclude that the company is in unstable financial health. The financial and operating activities of the firm shows that the firm has less assets in paying the long-term and short-term obligations. Investors tend to focus on firms who record an increase in their profit margins. The operating profit for the company shows that the performance of eh company is not good enough for the confidence of the investor. In Conclusion, The organization is the holding firm of Mark and Spencer Group of companies. The company is a clothing retailer found in United Kingdom with over 731 branches across the nation. The company sells the womenswear, home ware, menswear, and lingerie. The company offers home and clothing products in addition foods sourced from more than 2000 suppliers from all over the world. The directors are responsible for driving Spencer forward within the benchmark of proper accountability. This is the objective of the company. A regulatory benchmark that is intended to improve the benchmark of Spencer’ corporate governance has a higher chance if succeeding if it approves that the governance needs to support the entrepreneurial leadership of the firm, as it ensures that the risk of the firm is well managed. This needs an extent of flexibility in the way the firm adapts and adopts the practices of governance. Some of the income was used in paying back outstanding long term debts that the company owes. The cash flow of all the activities is strong, but long term debts were big with the effect of disposal and acquisition and the vigor of the year end. The recession that hit the company in 2008, made the company to receive a nominal amount from issuing ‘ordinary shares since the market had little cash to invest in the firm due to which made the proceeds to decline over the subsequent years. Reference Beckett, A. 2009. Spencer Education custom casebook: strategic management 5th ed. Harlow: Spencer. Chant, P. 1989. The financial statement presentation of corporate financing activities. Toronto: CICA. Focardi, S. M., & Fabozzi, F. J. 2004. The mathematics of financial modeling and investment management. New Jersey: Wiley. Foundations of Finance the Logic and Practice of Financial Management, Student Value Edition + Myfinancelab Package. 2010. New York: New York Press. Howells, J. 2003. Financial techniques, institutions and innovation. Aarhus: Department of Organization and Management, Faculty of Business Administration, the Aarhus School of Business. Media, B. L. 2011. FIA - Foundations in Financial Management - FFM 2012 Study Text. London: BPP Learning Media. Spencer, B. 1992. A common sense approach to business strategy. Wellington, N.Z.: New Zealand Society of Accountants. Press release: Spencer 2010 interim results unaudited. 2010. London: Spencer. Read More